In a typical credit card transaction, a card holder purchases from a merchant or service provider (“the merchant”) goods or services (“the goods”) using credit. The credit is extended to the card holder by an issuing bank (the “issuer”). The merchant presents a debit to an acquiring bank (the “acquirer”). The acquirer pays the merchant for (and thus “acquires”) the goods. A network in communication with the issuer and the acquirer settles the transaction between the issuer and the acquirer. The network may collect network fees from the issuer and the acquirer in connection with the settlement.
The issuer may impose upon the acquirer a fee for participating in the transaction. The fee may be referred to as “interchange.” Interchange may be a fixed fee for the transaction or a percentage of the transaction. Interchange flows from the acquirer, through the network, to the issuer. The issuer typically uses interchange to cover costs of acquiring credit card customers, servicing credit card accounts, providing incentives to retain customers, mitigating fraud, covering customer credit risk, group comp and other expenses.
The acquirer may deduct a “transaction fee” from the amount that the acquirer pays the merchant in exchange for the goods. The transaction fee may cover the acquirer's network fee, interchange, and other expenses. The acquirer may obtain a profit from the transaction fee.
FIG. 1 shows typical credit card transaction settlement flow 100. At step 1, the merchant provides $100 in goods to the card holder. The card holder pays with a credit card. At step 2, the issuer transmits to the card holder a statement showing the purchase price ($100.00) due. The issuer collects the purchase price amount, along with interest and fees if appropriate, from the card holder. At step 3, the issuer routes the purchase price amount ($100.00) through the network to the acquirer. At step 4, the acquirer partially reimburses the merchant for the purchase price amount. In the example shown in FIG. 1, the partial reimbursement is $98.00. The difference between the reimbursement amount ($98.00) and the purchase price amount ($100.00) is a two dollar ($2.00) transaction fee.
At step 5, the acquirer pays an interchange amount ($1.50), via the network, to the issuer. At step 6, both the acquirer and the issuer pay a network fee ($0.07 for acquirer and $0.05 for the issuer) to the network.
The net profits of the parties to settlement flow 100 are shown in Table 1.
TABLE 1Net positions, by party, based on settlement flow100 (shown in FIG. 1).PartyNet ($)Issuer1.45Acquirer0.43Network0.12Merchant−2.00
In settlement 100 (shown in FIG. 1), the transaction fee is based on a merchant discount rate of 2%. The $1.50 interchange is based on an interchange rate of 1.5%. The sum of the network fees ($0.07 and $0.05) is based on a total network fee rate of 12%.
Networks offered under the trademarks VISA, MASTERCARD, NYCE and PULSE are known. Networks typically set interchange rates. Interchange rates often depend for each network on merchant type and size, transaction processing method and other factors. Some networks set rules that prohibit merchants from charging an incremental fee for credit card payments, establishing minimum or maximum purchase price amounts or refusing to accept selected cards. Table 2 shows benefits of settlement flow 100 (shown in FIG. 1).
PartyBenefitMerchantAccess to card holder funds andcreditTimely settlementProtection from customer fraudand credit riskIncreased purchase priceamountsIssuerReliable payment platform withbroad acceptanceConsistent customer experienceacross merchantsPredictable source of revenueto support card issuance costsCard holderAccess to ready funds andcreditAbility to make purchasesvirtually anywhereProtection from fraudProtection from merchantdisputesReward for card based purchases
The merchant is often prohibited from directly passing the transaction fee along to the card holder. Nevertheless, the transaction fee increases the merchant's operating expenses and causes the prices of the merchant's goods to increase. If the merchant and the card holder could share information about the transaction fee, the merchant's expenses may decrease. Some or all of the savings could be shared with the card holder. POS apparatus, however, are not configured to provide the card holder with such information. Therefore, the card holder is unable to evaluate the affect on goods prices of the use of a credit card. Also there, is currently no way for the merchant and the card holder to share the transaction fee.
It would be desirable, therefore, to provide apparatus and methods for providing a card holder with transaction fee information at a point of sale.
It also would be desirable, therefore, to provide apparatus and methods for a card holder to select a transaction fee offer at a point of sale.